G20 Labour and Employment Ministers’ Meeting (26/09/2011)

I would like to begin by thanking the French government for its effective leadership in the G20 and for giving us the opportunity to help set the stage for your discussions.

This G20 Ministerial meeting comes at a grave moment. Economic growth is faltering in many advanced G20 economies and there has been some deceleration of growth in major emerging economies. More than two years into the recovery, unemployment and under-employment remain stubbornly high in many countries. And many workers remain trapped in low-paid jobs with little social protection.

As I said recently at the presentation of the 2011 OECD Employment Outlook concerns about high and persistent unemployment and under-employment must take centre stage on the political agenda. This is the human face of the crisis, the most visible manifestation of the challenge we face to restore sustained and inclusive growth. In this context, long term unemployment and the plight of our youth are of the highest importance.

The threat of unemployment becoming entrenched

One of the most worrying features of the present situation is the steep rise in the number of people who have been unemployed for a year or more. Before the crisis, long-term unemployment affected 4 out of 10 unemployed people in France and Germany but it was less of a problem in Spain and the UK, and affected only one in ten unemployed in the US.

The picture is different today. Long-term unemployment has tripled in the US, affecting more than one in three unemployed. In Spain, more than 40 per cent of the 4.9 million unemployed have been out of work for more than a year. And in South Africa, long-term unemployment affects more than 60 per cent of all jobseekers.

We know only too well from past recessions that steep hikes in long-term unemployment can take many years to unwind, and in the meantime, people concerned are at a high risk of exclusion and poverty.
The unemployment situation is not as bad in most emerging G20 economies, but they suffer more from informality and underemployment.

Renewed job creation in the formal sector is essential for bringing down unemployment and under-employment in the informal sector. In the context of limited public resources, the focus should be, more than ever, on cost-effective measures that focus on the most vulnerable groups. Net hiring subsidies which support companies that decide to expand their workforce is one way to boost job creation in the short-run. For example, the recent announcement by President Obama of the American Jobs Act includes a proposal of tax cuts for small and medium-sized businesses if they hire new workers. Companies will also get a tax credit of $4,000 if they hire someone who has been unemployed for 6 or more months.

Greater investment in training, especially linked to local labour market needs, is also warranted in the present circumstances, to facilitate re-employment, especially those with low or obsolete skills.
At the same time, income support to the unemployed should be maintained, as President Obama has proposed, but it is essential to condition it on effective job search.

In many emerging countries, efforts are needed to reduce the risks of vulnerable families sliding into extreme poverty and exclusion. In this sense, it is crucial to have effective social protection programmes already in place when a crisis strikes.

The universal challenge of tackling youth employment

The other major challenge that must be tackled is to give youth a better start in the job market. As documented in the background report for this meeting on youth that we have prepared in collaboration with the ILO, this is a challenge that cuts across all countries. The report builds on OECD's in-depth country reviews on youth employment and training.

Young people have been hard hit by the global economic crisis; in most countries they have borne a disproportionate share of job losses and many of them are facing significant barriers to finding worthwhile employment, even in the current recovery phase. One in two South African youth in the labour market are unemployed, around one in four in France and Italy, and in Spain the youth unemployment rate is 46 per cent. But the hardship for youth goes well beyond unemployment. Many are discouraged and do not even attempt to enter the labour market, and others are involved in precarious informal jobs, which offer limited stability, low pay and no social protection.

Going forward, some G-20 countries face the daunting challenge of generating sufficient productive and rewarding jobs for large and growing youth cohorts. Others face the challenge of ensuring that job prospects for youth, especially those with low skills, are not damaged by rapid technical change and globalisation.

Improving the labour market situation of youth requires a two-pronged approach. First, action needs to be directed at tackling the rise in youth joblessness that took place during the crisis, though labor programs, including hiring subsidies and support.

Second, policies must be put in place to overcome the long-term failure to give all youth a better start in the labour market. First by equipping them with basic foundation skills relevant to the labour market, and second by well-designed vocational education and training programmes, that facilitate a successful transition from school to work.

In the face of these challenges, governments must take decisive actions, including in depth reforms to improve the functioning of the labour market. It is striking to note that in a number of countries, where major labour market reforms were implemented well before the crisis, unemployment has risen only modestly or has even fallen to below pre-crisis levels.

Therefore, I am particularly glad to see the very strong focus that the French Presidency is giving to employment issues and to youth employment in particular. Going forward, the G-20 process can play a pivotal role in promoting better policies for youth and knowledge sharing about good practices. The planned task force on employment can play a decisive role in this context. We stand ready to provide all required support to develop and implement such an initiative drawing upon our extensive expertise and working in close collaboration with the ILO and other relevant international organisations.

Minister Bertrand,
Ministers,
Policies that promote job creation, better job opportunities and well-functioning social safety nets are crucial for helping the many who are still struggling to find jobs. These policies are not just spending items in a strained public budget. They are a vital social investment for the future, to help move our economies onto a path of sustainable economic growth and well-being.

There are no quick fixes. All G20 governments face difficult trade-offs in this second wave of economic strain, to reignite growth, advance job creation and bolster social protection systems, while taking care of fiscal sustentability in the long term.

The OECD stands ready to help all G20 countries to make their policy choices at this crucial juncture.
Thank you.